A GUIDING FORCE FOR HALF A CENTURY

ABINGDON, Va. -- From a single Piggly Wiggly store in the coal-mining region of southwestern Virginia, K-VA-T Food Stores here is about to mark its 50-year anniversary as a 90-store powerhouse in the Appalachian region of Kentucky, Virginia and Tennessee.

The guiding force behind the company is Jack C. Smith, chairman and surviving founder. At 80, he still keeps his hand in the business while leaving day-to-day operations to his son, Steve Smith, president and chief executive officer.

Asked how it feels to celebrate 50 years in business, the elder Smith told SN, "We're not quite there yet, but I'm looking forward to it. Not many people can say they've been in business for 50 years."

Smith told SN he went into the grocery business out of necessity: He had a wife and two daughters to support, and few prospects when he was discharged from the Navy in 1954.

His father and cousin were partners in a Ben Franklin variety store back in his hometown of Grundy, Va. "My Dad said there was an opportunity back there to buy some stores, so I went home. But by the time I got there, the deal had fallen through. So I sponged off my parents while looking for a way to support my family," he recalled.

"Grundy was a town of about 1,950 people, and looking around, I asked myself, 'What does this little town need?' The answer I came up with was a supermarket. There was an A&P in town with two checkstands, one of which was always open and one of which was never open. I stood in line there 45 minutes one day, and that convinced me to go into the grocery business.

"My uncle had a piece of land, so I formed a partnership with my father, my uncle and my cousin, and we put up a building."

Smith said he got in touch with the Piggly Wiggly Corp., "and they sent a representative to look at what we were doing. Then we signed up as a Piggly Wiggly franchisee."

The Smiths opened the store on Nov. 17, 1955 -- "a huge store," Smith recalled, "of 8,800 square feet."

So Smith was in the grocery business, but had no idea how to proceed. "I had been a naval officer, so I knew nothing about running a grocery store. But I was willing to grab all the help I could grab," he said

He couldn't get any help from Piggly Wiggly because it didn't give direct assistance, he said, "but we tied up with Giant Wholesale, out of Johnson City [Tennessee]. They were a huge help in explaining how to set up the shelves and how to allocate space."

Yet the store had a hard time getting started, he said, "because Piggly Wiggly had just gotten into colorful fixtures, and no one had ever seen a green produce case or a red meat case or a cream-colored dairy case. My store was in a coal-mining region, and it was too pretty for my customers, who would stop in on their way home from work.

"They didn't need a pretty store -- it just didn't fit them -- so it had to grow on them."

During 1956, the first full year it was in business, Smith's Piggly Wiggly did $600,000, "which wasn't enough to survive on," he said.

"But during our second year, there was a flood in the area. While the competition got wet, our store was high and dry. That forced people to come to us, and we did $1.7 million that year. With that competitor handicapped for another year, we did almost $3 million in 1958. By then, the folks were used to the pretty colors."

Between 1963 and 1966, Smith acquired three Piggly Wiggly locations in a straight line from Grundy, Va., across U.S. Route 460 -- in South Williamson and Prestonsburg, Ky., and in Pikeville, Tenn. He acquired six Piggly Wigglys in Virginia in 1974, and five more in 1975.

However, as a multiple-store Piggly Wiggly operator, Smith said he felt frustrated by an inability to stock Piggly Wiggly's private-label lines "because Giant, our wholesaler, wouldn't carry them. So we operated without them.

"But when you want something, you go after it. In early 1975, our company joined other Piggly Wiggly operators -- with 24 stores among us -- to form a wholesale company called Mid-Mountain Foods. [We] began stocking Piggly Wiggly's private-label lines in three small warehouses."

Smith continued buying most of his supplies from Giant while using Mid-Mountain to supply only private-label goods, plus a few commodity items to help bulk out the deliveries. "That got us into the distribution business in the best way possible, by building and growing it," he said. "You couldn't do that today, but it worked for us then."

The elder Smith said he never encouraged his son or two daughters to enter the business. Yet he used to take his family to Piggly Wiggly conventions, "and Steve showed some interest in the business at those events. He attended some of the seminars and that was his education, one lick at a time. Things rubbed off on him gradually, without his knowing he was learning the grocery business."

Neither of Smith's daughters was interested in joining the business: One went into nursing, he said, and the other is a medical technician. However, Steve Smith joined the company in 1979 at age 22. He was assigned to run three limited-assortment stores, called Sav-U Discount Foods, that the company was testing. "I wanted him to have the opportunity to make something go that I didn't think would go," the elder Smith said. "It was a concept that turned out badly. But that was my responsibility, not his."

The stores closed within a year. "That was my humble start in the grocery business," Steve Smith told SN.

By 1984, Piggly Wiggly had been acquired by Malone & Hyde, a Memphis-based wholesaler. "The Malone & Hyde people asked me to sign an agreement that said I would continue to operate Piggly Wiggly stores exclusively. In return, they would feed me additional store locations. I said that was OK with me, as long as I could open stores only at worthy locations," Smith said.

Yet Smith's days with Piggly Wiggly were numbered when he learned that Quality Foods, a Greenville, Tenn.-based chain of 19 Food City stores, was for sale. Quality's stores were doing $175 million a year. Smith's 11 Piggly Wigglys were doing $95 million at the time, he recalled.

"We met with the owners and came to an agreement, but that put me in conflict with my franchise agreement to operate only Piggly Wiggly stores. So I withdrew from Piggly Wiggly for a sum of money, which was money well spent because I got to keep my 11 stores and got rid of Malone & Hyde as well. I was free at last."

After leaving Piggly Wiggly, Smith said he wanted a new name for his company. "We wanted a neutral name, and we wanted an acronym you could pronounce. So I came up with K-VA-T, which stands for Kentucky, Virginia and Tennessee -- the three states in which we operate."

Once Smith decided to adopt the Food City name for his stores, it took seven or eight months to convert them to the new banner. "So 1985 was a tough year for us. It was the first year we really didn't make money, though we didn't lose money. But by 1987, we had 30 stores, a warehouse and two or three new stores set to open. We were hot to trot."

In 1989, only three years after acquiring 19 stores, Smith found an even larger group of stores he wanted to buy: White Food Stores, a 47-unit chain based in Knoxville, Tenn. "They were not great stores," he said, "but they were in good locations."

However, he ran into complications with the Federal Trade Commission because of store overlaps at six or seven locations, he recalled. "We went to Washington, D.C., and the FTC told us we couldn't do the deal without closing some stores. We knew they would also ask us to sign an agreement to inform them every time we made an acquisition for the next 10 years. We didn't like that, so we withdrew our petition to acquire the stores and went home."

Regardless, circumstances conspired in Smith's favor. "One of my partners in the wholesale business decided he wanted to buy the stores the FTC wanted us to divest. So we accommodated him and sold him those stores, which eliminated the overlap. Then we filed a new petition to acquire White Food Stores and combined the two companies at the end of 1989. When the smoke cleared, we reopened 33 of them."

Absorbing those stores was tough, Smith told SN. "1990 was a really tough year because we had to close a handful of stores that were in bad locations or too small. That was the only year the company lost money -- about $1 million. But we accomplished our purpose and came out with 63 stores, which made us big enough to take care of ourselves."

In 1998, Smith acquired 11 Piggly Wiggly stores from his remaining partner in Mid-Mountain Foods.A year later, he bought eight Winn-Dixie stores in the Knoxville area. Since then, the company has boosted its store count to 90.

K-VA-T sales hit $1 billion in 2002 -- the same year he handed over the title of president and CEO to his son.

According to Steve Smith, K-VA-T has lasted for 50 years "because Dad has such a passion for this business, plus he's invested a lot of teaching and education in people. This is his life, and he loves it."

Smith said K-VA-T has had buyout offers over the years, "but nothing lately because they know we won't sell. We don't want to sell because we're having too much fun and making too much money."

He told SN he has no plans to retire. "There's no reason for me to retire. I'm already semi-retired. What would I do?"